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LM Insurance Corp. v. Connecticut Dismanteling, LLC

Court of Appeals of Connecticut

May 2, 2017


          Argued November 18, 2016

         Appeal from Superior Court, judicial district of Fairfield, Hon. George N. Thim, judge trial referee.

          Jonathan J. Klein, for the appellant (defendant).

          Christopher A. Klepps, for the appellee (plaintiff).

          DiPentima, C. J., and Beach and Pellegrino, Js.


          DiPENTIMA, C. J.

         The defendant, Connecticut Dis-manteling, LLC, appeals from the judgment of the trial court rendered in favor of the plaintiff, LM Insurance Corporation. On appeal, the defendant claims that (1) the court improperly admitted into evidence a certain document under the business records exception to the rule against hearsay, (2) there was insufficient evidence to support the judgment rendered in favor of the plaintiff and (3) the court improperly drew an adverse inference against the defendant for failing to call two witnesses at trial. We disagree with the defendant's claims, and, accordingly affirm the judgment of the trial court.

         Following a one day trial to the court, the following facts and procedural history were set forth in its memorandum of decision. The defendant is in the business of demolishing commercial and residential structures. In 2011, it obtained a policy of workers' compensation insurance from the plaintiff. This policy covered a one year period of time from September 6, 2011 to September 6, 2012. After receiving certain information, the plaintiff made an initial determination that the total premium for the year was $1000. At the conclusion of that twelve month period, the plaintiff had an audit conducted. As a result, the premium was revised and, after all adjustments, the defendant was billed an additional $82, 899. The process of adjusting the premium involved a classification of workers by the type of work performed, the business operation of the defendant, and an investigation of the defendant's payroll records, accounts, ledgers and other documents.

         The second policy obtained by the defendant from the plaintiff covered the time period from September 6, 2012 to September 6, 2013. On January 7, 2013, the plaintiff canceled the second policy as a result of nonpayment of the revised premium for the first policy. Following the cancelation, one of the plaintiff's employees, Kimberly MacBain, performed a second audit, and determined the revised premium for the second policy to be $11, 713 for the time period of September 6, 2012 to January 7, 2013.

         The plaintiff commenced this action, alleging a single count of breach of contract; namely, the nonpayment of $94, 612, the total of the two revised premiums.[1] The defendant denied liability and countered that the plaintiff had miscalculated the revised premiums. Specifically, the defendant claimed that four of its employees, Alfred Capozziello, Bob Stadt, Desmond Williams and Matthew Brandimarte, had been classified incorrectly. An incorrect classification substantially impacted the amount due to the plaintiff. The premium was calculated by multiplying the classification code of an employee by the payroll rate for each classification.

         Specifically, the rate for the defendant's employees classified under code 5403, carpentry not otherwise specified, was $21.69 per $100 of payroll. This rate was significantly higher than employees classified asclerical workers, thirty-seven cents per $100 of payroll, or outside sales persons, seventy-eight cents per $100 of payroll.

         The court noted MacBain's testimony that ‘‘the rules of workers' [compensation] state that you apply the class code that best fits the operation, and then you pull out standard exception [employees]. . . . [I]t's up to the policyholder to show us backup on the specific duties for standard exception employees.'' In other words, all of the employees of a particular employer initially were classified with the code that best fit the nature of the business as a whole. The employer then had the opportunity to demonstrate that a different code, with a lower rate, should apply to a particular employee. Thus, the plaintiff used the code 5403 as the default classification for all of the defendant's employees due to its operation as a demolition business. The court found that all of the defendant's employees had been classified properly with the exception of Alfred Capozziello.[2] The court also noted that the defendant ‘‘kept very loose records and when audited [provided] minimum or suspect information concerning payroll and job classifications.'' (Internal quotation marks omitted.) After adjusting for the misclassification for Alfred Capozziello, the court rendered judgment in favor of the plaintiff in the amount of $89, 447.23 on April 23, 2015.

         On May 8, 2015, the defendant filed a motion to rear-gue pursuant to Practice Book §§ 11-11 and 11-12. Specifically, it claimed that the court erred by drawing an unfavorable inference as a result of the defendant's failure to present Williams and Brandimarte as witnesses during the trial. The defendant also noted that the evidence at trial revealed that Brandimarte had died prior to the start of the trial and that Williams had not been an employee of the defendant. The court denied the motion to reargue on July 2, 2015. This appeal followed. Additional facts will be set forth as necessary.


         The defendant first claims that the court improperly admitted into evidence a certain document under the business records exception to the rule against hearsay. Specifically, he contends that the court improperly admitted into evidence the first audit, conducted by Steven White, because he was an employee of a third party company and, therefore, his audit could not be a business record of the plaintiff under this hearsay exception. The defendant also argues that the plaintiff failed to establish that the first audit was a business record of the third party company because the founda-tional elements for the business records exception were not established. The defendant further argues that it was harmed as a result of the evidentiary error. The plaintiff counters that the court properly admitted the first audit into evidence pursuant to our decision in Crest Plumbing & Heating Co. v. DiLoreto, 12 Conn.App. 468, 531 A.2d 177 (1987). It further contends that defendant's challenge to the foundational elements of the first audit was not raised before the trial court and, even if it had been, it is without merit. We agree with the plaintiff.

         We begin by setting forth our standard of review. ‘‘The trial court's ruling on evidentiary matters will be overturned only upon a showing of a clear abuse of the court's discretion. . . . We will make every reasonable presumption in favor of upholding the trial court's ruling, and only upset it for a manifest abuse of discretion. . . . [Thus, our] review of such rulings is limited to the questions of whether the trial court correctly applied the law and reasonably could have reached the conclusion that it did. . . . To the extent [that] a trial court's admission of evidence is based on an interpretation of the Code of Evidence, our standard of review is plenary. For example, whether a challenged statement properly may be classified as hearsay and whether a hearsay exception properly is identified are legal questions demanding plenary review. . . . We review the trial court's decision to admit [or exclude] evidence, if premised on a correct view of the law, however, for an abuse of discretion. . . . Additionally, [b]efore a party is entitled to a new trial because of an erroneous evidentiary ruling, he or she has the burden of demonstrating that the error was harmful. . . . The harmless error standard in a civil case is whether the improper ruling would likely affect the result.'' (Citations omitted; internal quotation marks omitted.) Milford Bank v. Phoenix Contracting Group, Inc., 143 Conn.App. 519, 532-33, 72 A.3d 55 (2013); see also State v. Saucier, 283 Conn. 207, 218-221, 926 A.2d 633 (2007); Doyle v. Kamm, 133 Conn.App. 25, 39, 35 A.3d 308 (2012).

         Next, we identify the relevant legal principles regarding the defendant's evidentiary arguments. ‘‘Hearsay is an out-of-court statement offered to establish the truth of the matter asserted. Conn. Code Evid. § 8-1 (3). Hearsay evidence is inadmissible, subject to certain exceptions. Conn. Code Evid. § 8-2.'' Manka v. Walt Disney Co., 149 Conn.App. 1, 4 n.6, 87 A.3d 1165 (2014); see also Doe v. Hartford Roman Catholic Diocesan Corp., 317 Conn. 357, 390, 119 A.3d 462 (2015). One such exception is the business records exception. See General Statutes § 52-180; Conn. Code Evid. § 8-4. In order to establish that a document falls within the business records exception to the rule against hearsay, codified at § 52-180, [3] three requirements must be met. See Mil-ford Bank v. Phoenix Contracting Group, Inc., supra, 143 Conn.App. 536. ‘‘The proponent need not produce as a witness the person who made the record or show that such person is unavailable but must establish that the record was made in the regular course of any business, and [2] that it was the regular course of such business to make such writing or record [3] at the time of such act, transaction, occurrence or event or within a reasonable time thereafter.'' (Internal quotation marks omitted.) Id., 535; see also C. Tait & E. Prescott, Connecticut Evidence (5th Ed. 2014) § 8.28.4, p. 600. Our Supreme Court has explained that the rationale for this exception ‘‘derives from the inherent trustworthiness of records on which businesses rely to conduct their daily affairs.'' (Internal quotation marks omitted.) Connecticut Light & Power Co. v. Gilmore, 289 Conn. 88, 116, 956 A.2d 1145 (2008); see generally New England Savings Bank v. Bedford Realty Corp., 246 Conn. 594, 600-601, 717 A.2d 713 (1998) (tracing common-law and statutory origins of business records exception). Furthermore, the business records exception is liberally interpreted. New England Savings Bank v. Bedford Realty Corp, supra, 603; see also C. Tait & E. Prescott, supra, § 8.28.4, p. 600.

         The following facts relate to this claim. MacBain, a field audit manager employed by the plaintiff, testified at the trial. She stated that White, an auditor for NEIS, a vendor of the plaintiff, conducted the audit at the end of the first policy period. White then provided that audit to the plaintiff. MacBain further testified that she was familiar with the results of that audit, that the audit was kept in the usual course of the plaintiff's business, and that the report was created contemporaneously with the audit. At this point, the defendant raised two objections. First, defense counsel argued that the plaintiff's counsel was attempting to qualify the audit as a business record not subject to the rule against hearsay, but no document had been shown to MacBain. Second, counsel argued that the audit was created by a third party and not the plaintiff, and therefore MacBain could not authenticate it. The court sustained the objection on the basis that no document had been presented to MacBain.

         The plaintiff's counsel then had the document marked for identification and showed it to MacBain, who identified it as the audit prepared by White for the plaintiff. MacBain indicated that the White audit was in the possession of the plaintiff and had been shared with the defendant. The defendant's counsel objected as follows: ‘‘This goes back to the second prong of the previous objection, which is this is not a business record of [the plaintiff]. This audit, the witness had testified, was created by an independent auditor from NEIS, which is an outside vendor. It's-and-and whether it's a business record of NEIS that's something that we don't know, but it's certainly not a record of [the plaintiff]. It's something that was provided by the outside [vendor] to [the plaintiff], and it doesn't satisfy the business records exception under section 8-4 of the Code of Evidence.'' The court overruled the defendant's objec- tion, concluding that the White audit was a business record of the plaintiff, and admitted it as a full exhibit.


         The defendant first argues that the court improperly admitted the White audit into evidence pursuant to the business records exception to the rule against hearsay because it was a business record of NEIS and not the plaintiff. The defendant further contends that the decision relied upon by the trial court in overruling its objection to the White audit, Crest Plumbing & Heating Co. v. DiLoreto, supra, 12 Conn.App. 468, was decided incorrectly. We are not persuaded by the defendant's arguments.

         The defendant claims on appeal that this hearsay exception does not apply to a business record created by an entity other than the party seeking its admission into evidence. Distilled to its essence, the defendant challenges the applicability of the business records exception in the case. Accordingly, we employ the plenary standard of review. See Midland Funding, LLC v. Mitchell-James, 163 Conn.App. 648, 653, 1 ...

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